As a new monarch comes to reign in the UK, Brits have moved fast to start minting coins with the face of their new ruler, Paddington Bear. 🧸 King Charles III is also getting his own coin, but all the King’s horses and all the King’s men haven’t been able to put their currency, the Great British pound (GBP), back together again. 👑 The pound has been getting, well, pounded, by the US dollar, along with a stack of other currencies. From Japan and China to our own flightless kiwi, exchange rates have been melting down like a clumsy bear against the US dollar, which continues to push up interest rates.
The impact of currency movements can stretch far and wide. A strong US dollar may make a New Zealand holiday more attractive to tourists, but it also makes buying that new Tesla robot (TSLA) to water your plants a lot more expensive. 🌱 Hatch investors may have noticed that our Kiwi dollars don’t stretch quite as far as they used to, but dividends paid out in tasty US dollars are worth relatively more.
For US companies, the rising US dollar can mean earnings from other countries are worth less when the money is brought back to the US. If there is one company who knows this it’s Maccas. McDonald’s (MCD) makes more than half their earnings outside the US. The company is also the inspiration for the Big Mac index, which shows the relative purchasing power of currencies compared to the USD by looking at the price of Big Macs around the world. 🍔 In the July update, Big Macs in Japan were trading at a bargain -45% discount to the equivalent price in USD. The discount has forced McDonald's to hike the price of their Big Macs in Japan, just in case it’s enough to tempt Paddington to dump the marmalade sandwiches and move countries. 💴